What to expect with property auctions
Programmes such as Homes Under the Hammer provide some insight as to how auctions are conducted and what prudent, interested parties should do. Post Covid 19, most property auctions, both residential and commercial are now conducted online with interested parties having to register before being allowed to submit bids. Online auctions, whilst they lack the buzz of the auction room, have proved to be both popular and effective. Analytical data is easy to obtain and circulate in order to establish how many people have viewed each lot, downloaded the legal documents and submitted bids. It also a lot easier for the auctioneers to establish who the under bidders are. In the case of physical auctions the Auctioneers typically need to have a few people dedicated to reading the room in order to establish the identity of underbidders.
Current Trends in Auction Sales in 2023
Many Auction houses including Allsops and Savills are reporting increased interest in auction lots notwithstanding the tough economic climate and increasing interest rates. Figures released by proptech specialists Iamproperty reveal an increase in auction activity for Q2 of this year as compared with the same period in 2022. There still appears to be a healthy appetite for a good deal, even if there are fewer bargains than in yesteryear. Experienced auction goers have tended to change their strategies from time to time in attempt to maximise returns. In some cases, the writer’s clients’ have started to target properties in the North of England and larger properties in the Southeast which can be renovated and converted into HMO’s.
Disclosure and due diligence
Sellers, their Solicitors and the Auctioneers are under an obligation to provide honest and accurate information about each lot in their legal packs. There have however, been instances where information which would otherwise be crucial to a purchaser have been missed out or where buyers have failed to read a legal pack properly only to get a nasty surprise after completing. One recent example was a failure by a seller to disclose the fact that a piece of land was subject to an overage payment. In another, a buyer who failed to inspect or read the legal pack discovered after completion, that tenants were in situ and would remain in occupation beyond completion.
The maxim “buyer beware” applies so it is always prudent for a prospective bidder to do due their diligence.
Top tips for buyers looking to bid at auction.
Here are a few golden rules to follow if you are keen to take the plunge and bid at auction: –
- Register in good time prior to the auction. ID, proof of a 10% deposit and source of funds will generally be required.
- Download the auction conditions, the legal pack and associated special conditions for the lot at least a week before the auction.
- Try to inspect the lot and where the property requires attention perhaps get the opinion of a Surveyor, Structural Engineer or experienced Builder. Relying on the auctions photographs alone is risky as they may not reveal the full picture.
- Appoint a Solicitor with auction experience to review the legal documents ideally at least a week before the auction date. Some buyers are reluctant to pay for a pre-auction review, but this can prove costly. A Solicitor can help to identify if the legal pack contains out of date searches, any missing documents which could be important and identify potential issues with boundaries, access to and from the property or in relation to the purchasers intended use.
- Raise queries with the Auctioneers and if possible, the sellers’ Solicitors.
- Set a bid limit above which you are not prepared to exceed (within reason). Any budget should also take into account any SDLT payable along with any additional charges set out in the special conditions.
- Have your finance lined up whether it is cash or some form of mortgage agreement in principle. Specialist auction lenders are more suitable that high street lenders.
- Ensure that if successful, you will be able to complete on the agreed completion date which is typically 28 days after the exchange of contracts. Exchange usually takes place when the gavel (auction hammer) is deemed to have fallen following the successful bid.
- If you can submit a pre-auction bid, consider doing so as it might just be accepted if it matches or exceeds the vendors reserve price. The lot would then be sold prior and withdrawn from the auction.
- If you are unsuccessful or the lot is withdrawn, it’s always worth having a chat with the Auctioneers. They typically retain details of under bidders just in case a sale falls through or a lot does not sell on the auction day.
How can our property lawyers help you?
The property team at Hanne & Co can assist any individuals or companies wishing to sale or buy at auction. In the first instance please contact david.arivo@hanne.co.uk
